Petroleum products sales in China is reported slump before the coming Lunar New Year holidays. Regional major suppliers Petrochina and Sinopec are reducing prices to encourage sales.
Retail petroleum prices in China are set based on international markets. Maximum wholesale prices are decided retroactively from the official retail prices. Suppliers set their prices at the maximum limit when the market is in tight, but they often cut prices in case of sales slump.
Chinese official retail petroleum products prices are unlikely to decrease in the near term since global markets are firmer. Meanwhile, producers and dealers who have heavy stocks seems to reduce inventories with lower prices prior to the Lunar New Year holidays.
Crude oil processing by Chinese refineries in December rose 8.4% on year to the record high at 43.12 million tonnes, or 10.19 million barrels per day, according to the National Bureau of Statistics.
Although China's crude oil imports in the same month increased 8.0% on year to 23.67 million tonnes and domestic production rose 5.6% from a year ago to 17.94 million tonnes in the month, end-December crude oil stocks level was 3.6% lower from the previous month because of the large amount of processing.
On the other hand, stocks of petroleum products as of end-December increased 4.2% from a month ago. Especially, gasoline inventory gained 8.5% from end-November. Excess production against domestic demand also boosted exports of petroleum products in December to 25.2 million tonnes, 12% higher than a year ago.
Recent high petroleum products inventories at Chinese suppliers suggest that situations in January were similar with the previous month.
Or petroleum consumption tax introduced on 1st January may have been depressed the demand.
Even though economic index shows Chinese economy is recovering, fuel demand does not increase enough. Higher production based on the optimistic forecasts fueled by stronger index seems to be weighing on the Chinese petroleum market.